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India govt raises grant for Nepal by 17 percent

The Indian government has allocated a grant of IRs3.75 billion (Rs6 billion) for Nepal in 2017-18, as against IRs3.20 billion in 2016-17

Feb 2, 2017-The Indian government has pledged to extend 17 percent more in financial aid to Nepal in the next fiscal year, indicating greater enthusiasm of the southern neighbour to support the landlocked country’s development endeavours.

The Indian government has allocated a grant of IRs3.75 billion (Rs6 billion) for Nepal in 2017-18, as against IRs3.20 billion in 2016-17. The allocation was made through the Union Budget 2017-18 launched by Indian Finance Minister Arjun Jaitely on Wednesday.

In addition to the amount, India has also pledged to extend a grant of IRs113.30 million to Nepal Police Academy in 2017-18, the Indian budget document says.

The grant pledged for Nepal in 2017-18 is second highest among South Asian countries, with Bhutan leading the pack. The Indian government has expressed commitment to extend IRs37.14 billion in grant to Bhutan in 2017-18. The amount, however, is 4 percent lower than in 2016-17.

In total, India has expressed commitment to provide IRs49.34 billion in grants to South Asian countries, namely Afghanistan, Bangladesh, Bhutan, the Maldives, Nepal and Sri Lanka, in 2017-18. The pledged amount is 2.5 percent higher than in 2016-17.

One of the South Asian countries that has seen significant jump in Indian grant commitment is the Maldives. At IRs2.45 billion, the grant pledged for the island nation in 2017-18 is three times higher than IRs800 million allocated in 2016-17.

In addition to grants, India also extends soft loans to its neighbours generally at an interest rate of 1.75 percent. In Nepal’s case the interest has even been lowered to 1 percent.

Just this fiscal year, India pledged to extend Rs79.5 billion ($750 million) in soft loan to Nepal to support post-earthquake reconstruction works.

In the last fiscal year, India pledged to extend approximately Rs33 billion ($330 million) in grants to Nepal to facilitate reconstruction works and construction of road infrastructure in the Tarai. In fiscal year 2014-15, the Indian government pledged to provide Rs9.1 billion in grant and Rs98 billion in soft loan to Nepal.

Although Indian government’s aid commitment to Nepal has stood at a higher level, actual disbursement has been falling since 2012-13.

In 2012-13, Indian aid disbursement stood at $63.81 million, shows the Development Cooperation Report 2014-15, the latest released so far. This amount fell to $47.81 million in 2013-14 and dropped further to $22.23 in 2014-15, says the report.

One of the reasons for the drop in actual disbursement is slow progress is projects funded by India.

Some of the projects supported by India are cross-border rail line, integrated check posts, cross-border transmission lines, Arun III and Upper Karnali hydroelectric plants, Pancheshwar Multipurpose Project and Postal Highway, among others. Implementation of most of these projects has been sluggish.

To quell criticisms that India-funded projects in Nepal have failed to make desired progress, the two countries have recently formed an oversight mechanism to look into the matter. The mechanism held its second meeting on Monday. It concluded with both sides agreeing to expedite implementation of the projects.

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